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The province of British Columbia’s venture capital program has been established to support small businesses.  The program’s mission is creating jobs in our province and it hence stimulates our regional economy.  The funding from the venture capital corporations program is issued through a 30% tax credit that is receipted to equity investors.  An equity investor is one who purchases shares.  Such purchases are securities transactions which fall under the Securities Act which is regulated by the British Columbia Securities Commission (BCSC).

If you have a business idea, you should first look to determine whether it qualifies under this program.  You should speak to a securities lawyer who is able to help you table your plan in a fashion that is consistent with the requirements of the program.  You will be held accountable by the province and BCSC and so it is advisable to work with someone who is experienced.  Find a securities lawyer that will work with you to help assemble the documents which you’ll require for both the province and for the BCSC.  I will explain about one of these required documents, the annual financial statement.

There are different types of reports and different types of accounting standards and so it can be a little confusing trying to figure out which is going to be applicable to you.  For private companies, you would first review National instrument 45-106 Prospectus and Registration Exemptions.  This document contains various exemptions that if met, preclude you from having to file a prospectus.  A prospectus is the highest standard that would have to be met and so if your preference is to get through this as efficiently and economically as possible, you will want to move away from the prospectus requirement and thus fall into one of the exemptions.

The exemption in “Division 2.9 offering memorandum” (OM) is a common exemption.  To meet this exemption, an OM must be given to any investor before they sign a subscription agreement to purchase shares.  The OM is a moderate document in comparison to a prospectus.  Look next at National Instrument 45-106F2 Offering Memorandum for Non-Qualifying Issuers, in which document it indicates that an audit is required and that the financial statements must apply International Financial Reporting Standards (IFRS).  Because an audit is the most costly type of report and IFRS is the most costly of the accounting standard choices, I will explain to you what the other exemptions are and how to achieve them.

The program is often used when friends, family, and close business associates are investing in a business together.  If this is you, go back to 45-106 Prospectus and Registration Exemptions and determine if you meet the test for one of the other exemptions such as: Division 2.3 Accredited Investor or 2.5 Family, Friends and Business Associates.  If you do, then an OM is not required.  Instead, you would file a simplified reporting form for an exempt distribution.  You would be allowed to waive the audit requirement and may follow the more commonly applied accounting standard, Accounting Standards for Private Enterprises (ASPE).

While the terms family, friends and business associates do not require much explanation, accredited investor does.  It is included in the definitions section of 45-106 Prospectus and Registration Exemptions.  Typically, this means someone who “owns financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds $1,000,000.”  In speaking with the British Columbia Securities Commission, I’ve learned that they are expecting you to appropriately document the facts which govern your decision to follow one of these exemptions.

To learn more about the program, please visit their website and contact your securities lawyer.

For assistance with your financial statement needs, please call or email to book an appointment.

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Ammo Baines

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The information contained in this article is for general use only and should not be viewed as professional advice. Accounting and tax rules and regulations regularly change and individuals should contact a competent professional to obtain accounting and tax advice based on their specific situation.


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